Activist hedge fund Starboard Value has built a significant position in CarMax and nominated two directors to the company’s board as it pushes for operational and strategic changes, according to a report by Reuters.
The report cites an unnamed source familiar with the matter as revealing that Starboard holds roughly $350m worth of CarMax shares and has put forward Jeffrey Smith and Bill Cobb for board seats. The used-car retailer currently has nine directors.
The activist investor is urging the company to improve its digital customer experience, implement more dynamic vehicle pricing and pursue cost reductions, including identifying up to $300m in administrative and operating savings.
CarMax sells more than one million vehicles annually through its combined online and physical sales network and generates over $26bn in annual revenue. However, the company’s shares have fallen about 43% over the past year, leaving it with a market value of roughly $6bn.
Starboard has communicated its proposals in a letter to CarMax chief executive Keith Barr, arguing that improvements to the company’s omnichannel platform, along with tighter cost control and more responsive pricing, could help restore growth. The activist has previously invested in automotive-related companies including Cars.com and RB Global.
